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A group purchasing organization can leverage economies of scale by aggregating purchasing across multiple organizations, providing lower prices and streamlined procurement. However, not all GPOs work the same way. You need to understand the key features and benefits that make the best group purchasing organization for you before jumping in.
We will explain some of the key differences in the features and benefits of different types of group purchasing orgs and sourcing cooperatives. If you are evaluating different organizations, here are some of the key considerations.
One of the big distinctions has to do with whether a GPO operates as a for-profit or non-profit entity. For-profit GPOs are owned by investors or shareholders and their primary goal is to generate profits for the owners. Non-profits are owned by members or shareholders, where any surplus revenue is reinvested in the group purchasing org or distributed to members.
For-profit GPOs may offer competitive pricing, but there may also be some competing interests. Profit is the goal, so it can influence decision-making. With a non-profit, goals align more closely with the interests of members.
With a member-owned group purchasing org, members help make decisions. They hold influence over how the organization operates and make sure that priorities and strategies are driven by the needs of the members. This helps produce greater transparency and accountability as members have a vested interest in the success of the GPO.
With a GPO that is not owned by its members, there is less direct input. Decisions are made by the organization. While they still strive to deliver value to members, there can be a disconnect between priorities and needs.
To be successful, any GPO has to find savings for users. Group purchasing organizations also need to have a broad selection of suppliers to offer value. The best group purchasing organizations will have a rigorous process for competitive solicitation and vetting suppliers.
Strong supplier management helps negotiate more favorable contracts that produce higher levels of savings.
Top GPOs will employ category experts, who stay up-to-date on new suppliers, products and services, and emerging trends. This can ensure you get the best possible options. As new companies enter the space, this can help increase competition and also result in lower prices.
It can help to work with a GPO or sourcing cooperative that has industry experts. For example, since E&I Cooperative Services focuses solely on the education sector, you will often see cooperative contracts that include terms and conditions more favorable to academic institutions. Such expertise leads to deeper relationships with suppliers to help adapt to the changing needs of member institutions.
There will also be varying amounts of service and support that are available depending on the type of group purchasing org you choose. You might want an eProcurement platform or eCommerce solutions, training, or other services. You might also want an independent analysis of your procurement spend to see where you could save money by switching to GPO suppliers or consolidating purchasing power.
If these things are important to you, you should evaluate any GPO and see what they offer in terms of service and support.
There can also be a big difference in costs and obligations. Some GPOs have membership fees and require minimum spending levels or the use of required suppliers. Others do not.
E&I Cooperative Services is a non-profit and member-owned sourcing cooperative. Because members are owners, they have direct influence in the Cooperative’s decision-making and policies. This enables contracts to align more closely with what the members need in terms of supplier diversity, product mix, negotiations, terms, and more.
E&I Cooperative Services works hard to keep administrative costs low and returns any excess proceeds to its members in the form of patronage refunds . This often results in several million dollars typically returned to members in the form of cash or certificates of equity based on usage levels.
There is no cost to become an E&I member, and no minimum spending levels are required. You can join 6,000+ member institutions today and browse through more than 200 competitively-solicited contracts. You can opt in to any cooperative contract that works for you, at your discretion.
View a full list of the member benefits.
Sign up to become a member of E&I Cooperative Services and start saving today.
